Sunday, September 26, 2010

The Obama administration is taking health insurers to task again, this time for choosing to no longer sell plans intended to cover sick children, but gave the industry some new flexibility in implementing a problematic provision of the health care overhaul.

Many insurers have said in recent weeks that they would stop selling "child only" insurance plans because the overhaul requires them to accept all applicants, even if they apply for coverage at the last minute before treatment. Insurers say the provision, which went into effect Sept. 23, allows patients to game the system.

That's angered Health and Human Services Secretary Kathleen Sebelius, who said in a letter to the industry late Friday that insurers are operating in bad faith. She cited a March letter in which the trade group America's Health Insurance Plans said, "health plans recognize the hardship that a family faces when they are unable to obtain coverage for a child with a pre-existing condition."

AHIP said its members would abide by the provision. For many insurers, that meant leaving the niche market entirely to avoid getting all of the most expensive patients — or "adverse risk selection."

"While we appreciate the concerns of insurers and [state insurance] commissioners about adverse risk selection, and want to clarify what legal options exist, the plight of millions of parents who desperately want to provide health coverage and critical treatments for their children is a top priority, and we would hope that insurers who have for years offered child-only policies to healthy children would not deny coverage to families who desperately want to purchase health insurance," Sebelius wrote to AHIP. She sent a similar letter to the Blue Cross Blue Shield Association.

Insurers say they've been working with the administration since last spring to come up with a solution that would ensure children get coverage while minimizing disruption to the market and cost increases.

"That process has worked well in the area of family coverage," said Robert Zirkelbach, spokesman for AHIP. "In the small but critically important niche market for child-only policies a powerful incentive has been created for parents to defer purchasing coverage until after their children need it. Plans are therefore having to make very difficult decisions about offering new child-only coverage."

HHS also issued new regulatory guidance that could make it easier for insurers to sell the policies. The agency said insurers could raise rates based on health condition — though doing so will be illegal beginning in 2014; issue different rates for child-only policies and dependent children; impose a surcharge for dropping coverage and subsequently reapplying; and instituting rules to preventing "dumping" the policies.

The moves are likely to drive premiums up, if insurers choose to start selling the policies again.

Sebelius also said she welcomes state laws that would force insurance companies to cover these children if the company offers similar coverage to adults. Insurers won't have to cover all adults regardless of pre-existing conditions until 2014 under the health reform law.

"The administration is determined that children and families receive the full benefits provided to them in the Affordable Care Act," Sebelius wrote.

The agency has already said insurers could establish an open enrollment period — say, of approximately a month — in which insurers could sell policies and still legally close access the rest of the year. HHS said Friday that it would consider a uniform open enrollment period "only if it would result in issuers selling new child-only policies."

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